Magnesium Market Enters Autumn: Supply-Demand Mismatch Puts Magnesium Prices Under Pressure. Can the Magnesium Market Break Through Multiple Challenges? [SMM Domestic Analysis]

After nearly half a month of tug-of-war between sellers and buyers in the magnesium market, the future trend has been determined, with the supply-demand balance tilting again toward downstream buyers. Recently, magnesium prices have shown a slow downward trend. As of press time, the price of 99.90% magnesium ingot in the main production areas has fallen below the 17,000 yuan/mt mark, with mainstream quotations from magnesium plants ranging around 16,800-16,900 yuan/mt. However, considering that although magnesium plant inventory has increased, it remains at a multi-year low, has the downward channel for magnesium prices already opened?

Supply-demand pattern: Primary magnesium supply remained relatively low in August (primary magnesium production: 80,500 mt, magnesium ingot production: 71,000 mt). According to the SMM survey, some primary magnesium smelters are scheduled to undergo planned maintenance shutdowns during different periods in September. Based on SMM calculations, the affected production from these maintenance shutdowns is around 3,000 mt. Consequently, the expectation for growth in primary magnesium production has weakened, with September's primary magnesium production forecast at approximately 76,000 mt.

Breaking down the demand side: Magnesium powder production in August was 7,494 mt, down 10.41% MoM. Affected by sluggish demand from terminal steel mills and raw material substitution, domestic magnesium powder demand performed weakly. Recently, foreign trade demand saw a significant decline in orders due to the impact of Announcement No. 17, leaving magnesium powder demand with weak support. In September, magnesium powder demand may still be temporarily restricted by Announcement No. 17, presenting a negative feedback on magnesium ingot demand. Magnesium alloy production in August was 32,850 mt, up 0.77% MoM. Supported by demand from various application fields such as terminal new energy vehicles (NEVs), electric vehicles (EVs), and humanoid robots, magnesium alloy demand strengthened. However, its support for magnesium ingot demand itself is limited, primarily because most magnesium alloy producers are integrated enterprises covering the entire industry chain, with externally purchased magnesium ingot accounting for about 21.30%. Thus, alloy demand support mostly provides a floor for magnesium ingot. Recently, some magnesium alloy producers reported tight supply of magnesium alloys. With demand support, magnesium alloy production is expected to show an upward trend in the future, and the magnesium alloy market will provide bottom support for magnesium ingot demand. Sponge titanium production in August was 20,900 mt, down 9.39% MoM. Sponge titanium producers responded to the national anti-involution policy, leading to a reduction in sponge titanium production. Furthermore, the current single consumption of magnesium ingot for sponge titanium remains stable, so sponge titanium's support for magnesium ingot demand is generally modest. Considering that some sponge titanium producers place quarterly orders for magnesium ingot, the procurement cycle for magnesium ingot might be adjusted. However, due to the psychological expectation of "rushing to buy amid continuous price rise and holding back amid price downturn" among downstream purchasers, magnesium ingot procurement plans might be delayed. Additionally, inventory pressure in the sponge titanium market in September still requires production cuts to alleviate pressure, indicating that demand support from sponge titanium remains insufficient.

Reviewing the first ten days of September, the primary cause of the earlier decline in magnesium prices still lies in the impact of market expectations on supply and demand behaviors. On the demand side, influenced by the "rush to buy amid continuous price rise and hold back amid price downturn" mentality, market procurement activities were delayed. On the supply side, considering inventory pressure and the psychological expectation that selling earlier is more advantageous, producers actively shipped goods. In recent magnesium market operations, magnesium plants have shifted from occasional emergence of low-priced sources to actively offering goods at low prices, and market behavior has confirmed this trend. Will magnesium prices show a unilateral downward trend? In September, the magnesium market demand did improve. Based on the trading situation over the past week, the trading volume exceeded 1,000 mt for four consecutive working days. Subsequently, the magnesium market may see broad trading at a consensus period, then bottom out. However, in the long run, the rebound in magnesium prices is still a short-term phenomenon, and magnesium prices may continue to be guided by supply and demand and operate under pressure again.